Friday: China soy futures up marginally; market in consolidation mode

 

 

Soy futures held on to a sliver of gains on the Dalian Commodity Exchange Friday, with the market in consolidation mode but willing to shrug off reports of potentially tightening credit conditions.

 

The benchmark May 2010 soy contract rose marginally to settle at RMB3,627 a metric tonne.

 

"Soy are still in correction mode, but things have been stabilizing," said Xu Wenjie, an analyst with Tianma Futures. "Trade on the electronic bourse of the Chicago Board of Trade was also making small gains (during Asian trading hours)."

 

Soy futures on the Chicago Board of Trade ended mostly lower Thursday, as rains in the U.S. Midwest were bringing much-needed relief to dry areas, increasing confidence that U.S. farmers will harvest a record soy crop.

 

Media reports Friday that China plans to tighten capital requirements for banks, which would rein in record lending, didn't faze players on the Dalian bourse much.

 

"The market's largely priced in those worries, since they've been around for some weeks now," Xu said.

 

But more downside is forecast for soy prices, as favorable weather means larger crop sizes.

 

Weather conditions are expected to remain favorable in soy growing areas in the United States over the next couple of weeks as pod setting continues, AgriCharts said in a note Friday.

 

Recent rain in China's northern areas have also eased a drought in major soy and corn producing areas, the Office of State Flood Control and Drought Relief Headquarters said Thursday.

 

Still, soy's fundamentals have not changed dramatically, analysts said.

 

"Soy prices dropped sharply on the week but we continue to view the market positively with Chinese demand remaining strong and buoying U.S. exports," Barclays Capital said in a note late Thursday.

 

Meanwhile, the likelihood is fairly high that the government will provide a RMB200/tonne subsidy to soy crushers to improve sales of soy from state reserves, Xu said. Such sales have been tepid recently because the government's asking prices are higher than market prices.

 

Corn and soymeal futures settled higher Friday, while palm oil and soyoil futures posted losses.

 

Following are Friday's settlement prices in yuan a metric tonne for benchmark contracts and volume for all contracts in lots (One lot is equivalent to 10 tonnes):

 

                  Contract     Settlement Price  Change     Volume

Soy            May 2010      3,627        Up      2           144,744

Corn          May 2010      1,713        Up      8           252,460

Soymeal     May 2010      2,833        Up     20       1,702,968

Palm Oil     May 2010      6,348        Dn      4           853,964

Soyoil        May 2010      7,372        Dn     22          859,968